Time for a genuine assault on inequality

At the Global Progress Summit in Montreal last weekend, there was considerable discussion around the uncertain future of work; the new challenges facing social democracy from both the right and the left; and the various reasons why we seem to have lost support in our traditional communities.

The more I am involved in such discussions, the more I am convinced of the need for the centre left to once more set ourselves to the task of assaulting inequality in our societies, and show clearly that we stand, not as part of an elite or establishment, but as the very opposite – a force for change, for progress, for justice in our societies.

To my mind, there must be three central points to any meaningful effort to combat inequality in our societies – employment growth, wage growth, and equitable contributions from all. There are also a couple of areas that the centre left might want to avoid if we don’t want to undo our own efforts.

In too many countries, we obsess over headline unemployment rates, but we give little attention to the employment rates that show us more clearly who is being blocked from entry to the workforce. In a country like Ireland, unemployment is now down to just over 6% (from a high of over 15% during the crisis). And yet our employment rate is only hovering around 65%. Contrast this with countries as diverse as Greece, Germany, the UK and Finland, who all maintain an available pool of employment of 75% of working-age people.

Why is this? Broadly, because we don’t support women or people with disabilities into work. We deny women access to affordable childcare, and we have too few supports for people with disabilities, but because they don’t count as unemployed, they don’t seem to count at all. If we want to attack inequality, the best way to do that is to raise household income. And that has to start with increasing the number of people at work.

Once you make that determination, you then have to make sure that the wages people receive for their work are growing. Most developed countries have seen wage stagnation over the last decade or more. Little wonder people have lost faith in politics, when they are seeing no changes in their pay packets.

It’s time for the centre left to champion wage growth once more. That will entail much stronger minimum wages, linked to the real cost of living. It will require renewed models of social partnership that involve government, trade unions and employers sitting down and figuring out how sustainable levels of wage growth can be delivered in all sectors. And it is going to involve much more wage transparency, so that the gender pay gap and excessive executive pay can have a brighter light shone on them.

Getting more people into work, and making sure that work always pays well are at the heart of a more equal society, in my view. But so too is the principle of tax justice.

When people see profits growing exponentially in large companies, but also hear of the same companies paying little or no corporate taxes, they feel an inequity. When people read of the wealthiest in our societies using tax havens to get around paying their fair share, the same. And over time, public faith in the fairness of taxation erodes, and mistrust in politics grows. In other words, we sow the seeds of our own destruction.

Social democrats must now grasp the principle of tax justice in a way that we have avoided for too long. Every person and every company should pay some minimum effective rate of taxation. In Ireland, we did this for high earners in 2009. It didn’t destroy our economy, but it did bring in more taxes. There’s no reason the same principle can’t apply to corporates. While we’re at it, we should eliminate schemes that give refundable tax credits to companies, including those who haven’t paid any tax, and limit the period over which companies can offset losses.

All of this might seem like a straight forward argument for sensible, centre-left policies. But in taking such an approach, there are a couple of things we will need to avoid also.

The first is the idea of tax cuts for middle income earners. Because people don’t like taxes, there is always support for tax cuts. But the short-term popularity of such measures should be weighed against the long-term diminution of the capacity of the state to transform lives. Tax cuts cannot be our starting point.

The second is the continuing implementation of global trade deals that are negotiated outside of democratic oversight. There is considerable public scepticism around deals like TTIP and CETA, and not enough has been done to allay genuine concerns around the growth of investor dispute mechanisms. Most of all, we have not yet shown those who lose out as a result of globalisation will be cared for or supported in any meaningful way.

Some tax cuts for low and middle-income earners, and an almost unquestioning support for the benefits of globalisation around the world have been features of much centre-left discourse over the last 15 years. But while we weren’t paying enough attention, we failed to notice that they were undermining much of our traditional support base.

The challenges we face in the future seem enormous. They always do. An agenda like that I have outlined above might seem straight forward. But maybe we should stop making things too complicated.